Accounts Payable Best Practices that’ll get you through a Tough Economy

Accounts Payable Best Practices that’ll get you through a Tough Economy

Tough times call for tough measures. Exercising austerity in a tough economy is natural for many companies and we are seeing first-hand the benefits of delivering prudence in spending habits and cutting down on unnecessary expenditures. But the overall sentiment among SMBs is they should have prepared better. No exaggeration there — given the frequency with which all the major capitalist economies around the world have faced or are facing a recession-like situation, it would help if businesses prepared for the worst & were able to navigate through any crisis.

Revisiting Internal Process Implementation

For businesses, austerity measures start with optimizing internal processes. The pandemic has forced reduced man-hours & human engagement. This naturally affects worker output and the overall production figures. But, the important thing to note is such constraints could crop up at any time in the event of any kind of cash-crunch situation. Today, what we have is a dynamic workforce that is as fleeting as the morning dew. Ensuring their loyalty to the company and long-term engagement is an entirely different ball-game that should be tackled eventually. However, companies should set up their workplace infrastructure to function despite labor shortages. In other words, having a good process control system in place that does not need too much human or monetary capital will help ease some of the difficulties companies face during times like this pandemic.

The New Buzzword: Process Optimization

Contracting of capital and a drastic liquidity crunch has prompted companies to change the course of business process management. Process optimization is the new buzzword in the business world; and companies are doing everything to reduce the number of functionalities, implementation stages, process cycle times, and associated labor for mission critical tasks.

Accounts payable is one such function that can be optimized to lower the dependency on labor and operating infrastructure. We’ll look at a few best practices that you can adopt to make your AP more functional and operational, but at reduced costs.

Process Automation

Process Automation

Paper introduces latency and inefficiency in processes. The best option for SMBs as well as large corporations is to have in place a process automation solution that will take care of their document-dependent processes. AP Automation completely optimizes the vendor invoicing process — a typical invoice processing software with intelligent process automation capabilities captures and extracts relevant details from vendor invoices, classifies extracted information according to business rules, assigns appropriate workflows to classified data according to business requirements, implements those workflows to approve, validate, and verify extracted data and then sends them to an ERP, accounting software, or any other host system for further business use. AI and Machine Learning embedded in AP automation software drastically reduce the need for manual intervention, enabling easy scaling of workload to process more invoices without adding to headcount.

Process automation eliminates paper and manual effort, enabling increased efficiency and cycle times, regardless of the workload. An element of consistency in data availability to ERPs and other host systems is achieved wherein companies are assured of availing accurate data every time. Instances of incorrect data entries and repeat processing as a result of it are completely eliminated, leading to reduced operating costs and process delays. This aspect of process automation naturally introduces a system of best practices where companies will not be wasting time and costs on redundant, repetitive activities.

Liquidity & Cash Flows

Cost centers within any company are often cash-strapped due to delayed receivables and pending payments. While expecting timely payments from customers is not entirely a dependable exercise, what companies can do is develop a stringent payable strategy that will allow them to not just make payments on time but also bank on early payment discounts. This may seem like a frugal exercise in money management at first but if you look at the magnitude of operations that incur lost savings as a result of delayed payments, timely reconciliation of receipts is a big step towards achieving healthy cash flows. Healthy cash reserves help companies strategize better and program their operations for sustainable growth. Timely reconciliations are one of the fundamental AP best practices that always guarantee good standing among various stakeholders, apart from ensuring liquidity.

Centralized Vendor Management Platform

Supply chain forms the backbone of any business. And so, it follows that maintaining supplier relations is of utmost importance for business continuity. Apart from ensuring on-time payments to suppliers, it helps that businesses keep their discourse with vendors in the most professional manner. Say, you are unsure about the vendor information connected to a particular invoice and would like to verify the same before proceeding to make the payment. By having a detailed database of vendor information along with the related purchase order details and transaction history with the vendor, you will be in an advantageous position to resolve exceptions quickly without having to prod the vendor for more clarifications. This helps maintain a positive and healthy relationship with your vendor, which can come in handy when supplies are scarce but you could be serviced first as a result of being on good terms with your vendors. A centralized vendor database helps exercise vendor relationship best practices for long-term business continuity.

Visibility & Compliance

Real-time visibility into invoice reconciliations and payment disbursements is made possible with an automated solution like invoice processing software. This visibility also ensures compliance with regulatory frameworks and tax laws due to the end-to-end audit trail that the software provides. Integrating invoice processing software with an accounting system or a certified tax software will help streamline accounts payable on a central, secure platform. These account for the critical best practices that every company must adhere to in order to maintain sound corporate governance.

F&A can be arduous given the numerous regulations and operational challenges that companies must tackle on a regular basis. A good intelligent process automation platform like invoice processing software takes care of the majority of these bottlenecks, leaving companies room for more strategic initiatives.

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